Cloud financial planning has emerged as a crucial battleground for organizations striving to maintain a competitive edge.

As businesses increasingly shift operations to the cloud, managing expenses and optimizing budgets has become an intricate dance. It’s a dance that demands precision, adaptability and the right tools.

“Cloud expenses are a 100% variable. They are very dynamic,” said Peter Goubert (pictured), senior director of product management at Apptio, an IBM Company. “You could build the best plan in the world that says this is exactly what we’re going to spend for the next three months … you could have a viral event that makes everyone run to your website, and all of a sudden you’ve spent 10 times more than what you thought you were going to spend.”

Goubert spoke with theCUBE industry analyst Rebecca Knight at the “Supercloud 5: The Battle for AI Supremacy” event, during an exclusive broadcast on theCUBE, SiliconANGLE Media’s livestreaming studio. They discussed the fundamental shifts, challenges and promising horizons of cloud financial planning. (* Disclosure below.)

The path to effective cloud financial planning

Organizations often approach cloud costs with a backward-looking mindset, using past spending as the basis for future forecasts. This approach lacks accuracy and fails to incorporate upcoming changes and investments, according to Goubert. Most tools available today provide trend-based forecasts, which are ill-suited for the ever-shifting landscape of cloud expenses.

“The challenges that people have today are just producing accurate forecasts just because cloud spend is so dynamic, and they don’t have the proper tools to do that,” he said. “Producing accurate forecast is a big challenge.”

Traditional budgeting and forecasting techniques, designed for fixed or semi-variable costs, fall short in the context of cloud expenses, which are highly dynamic and variable. This paradigm shift necessitates a fresh approach to financial planning, according to Goubert.

“First, you need a system that’s going to actually be monitoring your cloud spend that’s pulling in costs on a daily basis and [be] able to aggregate them from all your different CSPs,” he said. “A tool like Cloudability does all that.”

Managing cloud costs

There is a need for a system that can not only monitor daily cloud spending across various cloud service providers, but also generate forecasts that go beyond simple trend-based predictions, Goubert pointed out. Organizations require the ability to incorporate upcoming investments and adapt cost structures in response to changes driven by business activity. This transition from forecasting to planning is essential for aligning limited funds with strategic objectives.

“The fact that we’ve automated a bunch of things that used to be part of their job … there are going to be variances,” Goubert said. “With cloud costs, you don’t have that much control. So, you have to be able to react to variances. The job of the finance team is to figure out, ‘We’ve got a big spend over here and it’s completely justified.’”

Cloud cost management demands a shift toward agile planning. Unlike traditional budgeting, which may occur annually or quarterly, cloud expenses need ongoing monitoring and adjustment.

“IT planning is basically your technology spend,” he said. “There [are] many different components … there’s a bunch of costs that are generally a mix of fixed and variable, but there are things that you can plan out.”

Variances, such as unexpected spikes in usage, require immediate responses and reallocation of resources. Automating the aggregation of actual spending data and aligning it with forecasts is essential for efficient cloud financial planning, according to Goubert.

“We had a lot of input from folks that were looking for how they specifically wanted to automate this process,” he said. “We took all that feedback in, and that’s been the result of what we have today in cloud financial planning capabilities.”

Embracing automation and AI

Finance teams need to be equipped with tools that simplify the automation of processes, increase information visibility and facilitate better communication among teams, Goubert explained. With cloud expenses being a dynamic aspect of the budget, it is essential to ensure that finance professionals spend less time compiling data and more time addressing issues and making informed decisions.

“This has been something that our Cloudability customer base has been asking for a while,” he added. “We delivered a form of this product very early this year … as a result we heard a lot of different stories about how people needed to plan their assets and what kind of impact they had.”

Cloud financial planning is a critical discipline in the era of cloud computing. Its dynamic and variable nature requires organizations to adopt specialized tools and techniques that go beyond traditional budgeting and forecasting.

“It requires a different set of techniques in terms of managing it,” Goubert said. “There’s much more attention to it now, and you can’t apply the same kind of traditional budgeting and forecasting techniques.”

By embracing daily monitoring, driver-based planning and automation, organizations can navigate the challenges posed by cloud expenses effectively. The upshot of this evolution in cloud financial planning is improved budget management, better alignment with strategic goals and the ability to respond to changes in a more agile and timely manner, according to Goubert.

“AI will play a huge role,” he said. “AI needs to be fueled by data. The better the data you can give it, the better you can get help in making decisions. Ultimately, forecasting and planning are really decision support tools. The strategic planning aspect is being able to make better decisions at the time.”

Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s coverage of the “Supercloud 5: The Battle for AI Supremacy” event:

(* Disclosure: Apptio sponsored this segment of theCUBE. Neither Apptio nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)

Photo: SiliconANGLE